In 2021, the internal auditors of Guzi Company discovered the following material error made in a prior year:

Equipment was purchased on January 1, 2019, for $100,000. The purchase was incorrectly recorded as a debit to repair and maintenance expense. The equipment has a useful life of five years and no residual value. Guzi Company uses the straight-line method of depreciation for all depreciable assets.

The journal entry Guzi Company would prepare at December 31, 2021 to correct the error (ignore income taxes) would include a:

		Debit to equipment of $80,000.
		Credit to accumulated depreciation of $40,000.
		Credit to retained earnings of $80,000.
		Credit to repair and maintenance expense of $100,000.